OPINION:
President Trump has promised to create millions of new high-paying jobs. One easy first step is to repeal Biden regulations on America’s 4 million business partnerships (sometimes known as S-corporations), which are prolific job creators. The latest estimates find 10 million Americans employed by these business partnerships, with $800 billion paid in worker salaries and benefits.
As an example of the importance of this business model, more than 90% of Microsoft’s commercial revenue comes through its partnership ecosystem.
The profits from these enterprises are passed through to the 28 million partners, who make tax payments based on their share of those earnings.
The precise tax target is an accounting convention called “basis shifting” – which ensures that joined businesses are used to allocate costs and taxes owed. While technically complex (because everything with the U.S. tax code is complicated), partnerships have used it for decades. Whatever one thinks of basis shifting, the IRS doesn’t have the unilateral authority to change the tax laws– only Congress does.
The Biden administration didn’t like the tax rules, so instead of asking Congress to change them, Biden’s Treasury Department worked through the back door to unilaterally modify them as part of its “fairness” agenda.
The Biden crackdown treated business partners as tax cheats. When they hired 87,000 agents to harass companies and individuals, nearly 4,000 of these IRS tax collectors were hired to among other things, “expand enforcement focusing on complex partnerships.” The more than four million business partnerships became an overnight suspect class, as did the tax returns of millions of partners.
To pry money out of these partnerships, then-Treasury Secretary Janet Yellen created a now politically-motivated unit to investigate and audit partnerships. It should be disbanded.
The Biden team even wanted to create a retroactive tax (which should be illegal) by changing the rules and applying them going back six years in time. So, a tax structure that may have been perfectly legal in the past could now trigger investigations, fines, and litigation.
According to an Ernst and Young study prepared for the Small Business & Entrepreneurship Council (SBE Council) last year, more than 90 percent of partnerships are small businesses. The business partnership arrangement allows these firms to have ready access to needed capital to expand their operations. In all, these companies generated $1.3 trillion in our GDP.
These partnership arrangements allow promising small companies to grow into large ones. This uniquely American business structure is a hallmark of U.S. entrepreneurial success – a path for businesses to go from good to great.
It isn’t broken. The system works. That’s why the Trump Treasury Department needs to immediately command the IRS to cease and desist the Biden witch hunt against these partnerships. It’s a war on wealth. A war on U.S. businesses. And it’s a direct assault on the Trump promise to “make America great again.”
• Stephen Moore is a senior fellow at the Heritage Foundation and a co-founder of Unleash Prosperity. His latest book co-authored with Arthur Laffer is “The Trump Economic Miracle.”
Please read our comment policy before commenting.